The Government was under fire last night for setting aside a record £6.1 billion for industrial bailouts and state aid.

The current legal limit on funds allocated by the Department of Trade and Industry is £2.7bn. But under the terms of a new Bill, to be debated in Parliament tomorrow, that total will be increased by 126 per cent.

As the world economy shows increasing signs of fragility and the number of insolvencies reach their highest point in a decade, the money may be used to help restructuring and retaining inward investment.

But some MPs are concerned that the move foreshadows a return to 'picking winners' and will fund bail-outs of inefficient national champions such as BAE Systems or British Energy.

They are also concerned that new legislation will allow the DTI to push through large chunks of state aid without consulting Parliament.

'This Bill more than doubles the scale of aid which the Government is able to provide from taxpayers' funds, without any proper debate in Parliament from behind closed doors at the DTI,' says Vincent Cable, Liberal Democrat spokesman for Trade and Industry.

Cable suggested that an invasion of Iraq may drive some of Britain's blue chip names, particularly those in the transport industry, to the brink of insolvency.

'Why is the Government trying to increase its powers so substantially - are they trying to avoid having to justify to Parliament their proposals to spend taxpayers money, and what is funding on this scale needed for?' asked Cable.

He believes the Government is increasingly unwilling to let big-name British companies go under.

'In the last year for which audited figures are available, they only provided £113 million support under this head ing. With the recent bailout of British Energy and the capping of BAE Systems' exposure (under the the Nimrod maritime patrol plane and Astute attack submarine contracts) there is growing evidence of the Government's willingness to provide a safety net for those it sees as 'national champions', he said.

Some 16,000 companies, 300 a week, became insolvent last year - almost 9 per cent up on 2001. There were 30,587 individual bankruptcies, a 3 per cent rise on the previous year.

Government state aid seeks to encourage job creation and retention regionally throughout the country. The Government claims that nearly 24,000 jobs were created and 15,000 saved by £250 million of regional investment. Pfizer, the pharmaceutical giant, received a £5m grant, and Esso £700,000.

The DTI said tomorrow's move is 'routine' and was intended to increase flexibility and set limits for the next 20 years, rather than greatly to increase this year's budget.